The new company, which (for reasons that escape us) is to be named Essenta Foods, will have combined sales worth £1.7bn, employing about 17,000 staff. The merger might not go down terribly well with all those staff, though: apparently the new company will attempt to make about £40m worth of cost savings over the next three years, which makes it almost inevitable that jobs will be lost. Current Greencore CEO Patrick Coveney, who will head the new company once the merger has taken place in March, has already admitted that there will be losses ‘at the margins’ of the business, but said that should be offset by growth opportunities. But of course, he would say that.
Ireland’s corporation tax rate, which currently stands at 12.5%, is, naturally, the big attraction of a Dublin HQ. That said, the combined group should be able to offset the cost of the merger against profits, which could apparently mean that it won’t have to pay any corporation tax at all for the next three years. But things might not be quite so rosy for much longer: there’s talk that France and Germany, tired of being undercut, might force Ireland to raise corporation tax as a condition of this putative bailout. Ireland is complaining that this would affect its ability to attract foreign companies – just what it doesn't need at the moment. But he who pays the piper, and all that...
The deal may have come in the nick of time for Northern Foods, which last week said it had made a £9.5m loss in the six months to October 2, compared with a £12.9m profit over the same period in 2009. Sales of frozen foods had dropped by nearly a quarter, while the ‘pizza fairy’ ad campaign for Goodfella’s, its struggling frozen pizza brand, had failed to cast many spells over its sales figures. Two of its largest contracts, with Birds Eye pies and Dalepak, were also terminated last year, and its been struggling since then.
So what’s going to become of Northern Foods chief Stefan Barden? After joining the company in 2007 during a period when it was struggling after a string of profit warnings, Barden stabilised the company’s finances and built up new relationships, including a lucrative with Marks & Spencer. But although he’ll be staying until the merger completes, he’s keeping schtum on whether he’ll take up a position when it becomes Essenta. Perhaps he doesn't like the daft name.